Jeremy Company's auditor discovered the following errors during 2017 related to inventory. Assume the books are still open. Jeremy Company double counted $2,000 of inventory in 2015 resulting in an overstatement of inventory. Another error was made in 2016 and ending inventory was understated by $8,000. A periodic inventory system is used by Jeremy. You may ignore taxes.

(A) Determine the effect of the inventory errors on the following accounts. Be sure to identify whether the error overstated or understated the reported balances in the respective years and the specific amount.

2015 2016

Cost of Goods Sold on the Income Statement $_____________ $_____________

Ending Inventory on the Balance Sheet $_____________ $_____________

Net Income on the Income Statement $_____________ $_____________

Retained Earnings on the Balance Sheet $_____________ $_____________

(B) Prepare any journal entries Jeremy should record in 2017 to correct the inventory errors. Explain your reasoning.